City West Water Determination · 1. General Essential Services Commission City West Water...

City West Water Determination

1 July 2018 – 30 June 2023

19 June 2018

An appropriate citation for this paper is:

Essential Services Commission 2018, City West Water Determination: 1 July 2018 – 30 June

2023, 19 June

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Contents

Essential Services Commission City West Water Determination

ii

Contents

1. General 1

1.1. Introduction 1

1.2. Application 1

1.3. Effective period 2

1.4. Modification of time periods 2

1.5. Summary and structure 2

1.6. Definitions and interpretation 2

1.7. Annexure 3

2. Price control 4

2.1. General principles 4

2.2. Ancillary matters 4

2.3. Annual adjustment of prices 5

2.4. Price changes during a billing period 7

2.5. Reporting requirements 7

3. Amendment of Schedule 2 9

4. Uncertain or unforeseen events 12

4.1. General principle 12

4.2. Consideration by the commission 12

4.3. Procedure 13

5. Material error and unintended consequences 15

Schedule 1 – Definitions and interpretation 16

A Definitions 16

B Interpretation 17

Schedule 2 – Prices 18

Schedule 3 – Application of prices 21

3.1 Water usage fees 21

3.2 Residential property 21

3.3 Non-residential property 21

3.4 Private extension fees 21

3.5 Calculating the volume of sewage — residential customers 22

3.6 Calculating the volume of sewage — non-residential customers 24

3.7 Assignment of trade waste risk rank 25

3.8 Food waste charges 25

3.9 Miscellaneous fees and charges 26

Contents

Essential Services Commission City West Water Determination

iii

Schedule 4 – Pricing principles 29

4.1 Recycled water pricing principles 29

4.2 Pricing principles where scheduled prices do not apply 29

4.3 Pricing principles for New Customer Contributions (NCC) 30

Core pricing principles 30

NCC application 30

Incremental financing costs 31

Gifted Assets 31

4.4 Pricing principles for miscellaneous services not included in Schedule 2 31

4.5 Guidelines 31

Schedule 5 – Adjustment for costs associated with annual updates to the trailing

average cost of debt 32

Schedule 5A – Adjustments to prices 32

Schedule 5B – Prices 33

Formula 1: Determining the nominal cost of debt 33

Formula 2: Determining the real cost of debt 33

Formula 3: Determining the real regulatory rate of return 34

Formula 4: Trailing average cost of debt adjustment 34

Formula 5: Water service tariff 36

Annexure A 41

1. General

Essential Services Commission City West Water Determination 1

1. General

1.1. Introduction

(a) Clause 14 of the WIRO requires the commission to either:

(i) approve the maximum prices the regulated entity may charge for

prescribed services or the manner in which the regulated entity’s prices

are to be calculated, determined or otherwise regulated, as proposed by the

regulated entity in its price submission; or

(ii) specify the maximum prices the regulated entity may charge for prescribed

services or the manner in which the regulated entity’s prices are to be

calculated, determined or otherwise regulated.

(b) On 13 June 2018, the commission made its decision under the WIRO in respect of:

(i) the prices which City West Water Corporation (trading as City West Water)

(ABN 70 066 902 467) (City West Water) may charge for prescribed

services during the regulatory period; and

(ii) the standards and conditions of service and supply which City West Water

has included in its price submission.

(c) This Determination is made by the commission under section 33 of the ESC Act,

pursuant to clauses 10 and 14 of the WIRO.

(d) The purpose and reasons for the making of this Determination are to:

(i) give effect to the decision of the commission referred to in clause 1.1(b)(i);

(ii) specify the maximum prices which City West Water may charge for

prescribed services during the regulatory period or the manner in which

such prices are to be calculated, determined or otherwise regulated;

(iii) facilitate the achievement of the commission‘s objectives in the ESC Act and

the WI Act; and

(iv) reflect the requirements in the WIRO.

(e) The reasons for the making of this Determination are as set out in the decision

published by the commission on 19 June 2018.

1.2. Application

This Determination applies to City West Water and its successors and assigns in respect

of the business carried on by City West Water at the date of this Determination.

1. General


1.3. Effective period

(a) Term

This Determination takes effect on the later of the date on which notice of its making

is published in the Government Gazette or 1 July 2018, subject to clause 1.3(b), has

effect until the earlier of the date on which it is amended or revoked by a later

determination or 30 June 2023.

(b) Next regulatory period

Subject to clause 2.3(b)(ii), if the commission has not made a determination in

respect of the prices to apply in the next regulatory period on or before 30 June

2023, the prices or the manner in which such prices are to be calculated or

otherwise determined as set out in this Determination will continue to apply in

respect of prescribed services provided by City West Water between 1 July 2023

and the date on which the determination for the next regulatory period comes into

effect.

1.4. Modification of time periods

The commission may, by notice to City West Water, extend or reduce the time by which, or

the period within which, City West Water or the commission must comply with an

obligation under this Determination.

1.5. Summary and structure

Clause 2 of this Determination specifies the prices which will apply to prescribed services

during the regulatory period and sets out the procedure and formula according to which

prices may be adjusted during the regulatory period on an annual basis. Clauses 3, 4 and

5 provide for the circumstances in which prices may be adjusted during the regulatory

period otherwise than in accordance with clause 2.

1.6. Definitions and interpretation

In this Determination, unless the contrary intention appears:

(a) words and phrases in bold italics have the meanings given to them in part A of

Schedule 1; and

(b) the rules of interpretation in part B of Schedule 1 will apply.

1. General


1.7. Annexure

(a) For convenience, Annexure A to this Determination summarises:

(i) the assumptions underpinning the prices to apply to City West Water during

the regulatory period or the manner in which such prices are to be

calculated, determined or otherwise regulated; and

(ii) the standards and conditions of services and supply additional to those

specified in the Code which will be provided by City West Water pursuant to

the decision referred to in clause 1.1(b)(ii).

(b) For the avoidance of doubt, Annexure A does not form part of this Determination.

2. Price control


2. Price control

2.1. General principles

Subject to this Determination:

(a) Scheduled prices

City West Water must not charge more than:

(i) the scheduled prices in Schedule 2, during the first regulatory year; and

(ii) the amounts determined in accordance with clause 2.3, during each

subsequent regulatory year,

in respect of those prescribed services to which the scheduled prices in Schedule 2

relate.

(b) Application principles

The application principles in Schedule 3 will apply to the prices charged by City

West Water in respect of prescribed services during the regulatory period.

(c) Pricing principles

During the regulatory period, City West Water must apply the pricing principles in

Schedule 4 when determining the prices to apply to the prescribed services to

which the pricing principles in Schedule 4 relate.

2.2. Ancillary matters

(a) Contracts

Where City West Water has entered into a contract (a relevant contract) which

relates to the provision of prescribed services prior to 1 July 2018, City West

Water may charge the prices for prescribed services which are set out in that

relevant contract until its expiration, termination or a periodic review of the prices

set out in the contract. Once a relevant contract has expired or been terminated or

the prices in a relevant contract have been subject to a periodic review, the

scheduled prices in Schedule 2 (as adjusted in accordance with this Determination)

or the prices determined in accordance with the pricing principles in Schedule 4 will

apply for the remainder of the regulatory period.

(b) Dispute Resolution

Any question as to whether a price has been set in accordance with this

Determination will be determined by the commission on the basis of the

commission's interpretation of this Determination.

2. Price control


(c) Publication

City West Water must publish a list of its current prices and pricing principles for

prescribed services, and all relevant supporting information that is relied upon to

apply the prices or pricing principles, on its website at all times during the

regulatory period and must provide a written copy of the list to its customers on

request. The list must clearly indicate in respect of each price, the amount

determined in accordance with this Determination, the amount of GST payable and

the total price (in a manner consistent with the requirements of the Competition and

Consumer Act 2010 (Cth)).

(d) GST

City West Water will not be considered to be in contravention of this Determination

if a price charged by it for a prescribed service exceeds the amount determined in

accordance with clause 2 only by reason of the levying of a charge on account of

GST.

2.3. Annual adjustment of prices

(a) Adjustment

(i) Subject to Schedule 2 and Schedule 5, the scheduled prices in Schedule 2

will be adjusted in each subsequent regulatory year in the regulatory

period in accordance with the formula in clause 2.3(b)(i) and the procedure

in clause 2.3(c), and will apply to the prescribed services to which the

scheduled prices in Schedule 2 relate in that regulatory year.

(b) Formula

(i) Subject to Schedule 2 and Schedule 5, each price for the prescribed

services referred to in clause 2.3(a) will be adjusted in accordance with the

following formula with effect from the beginning of each subsequent

regulatory year in the regulatory period:

where:

is the price component for regulatory year ‗t‘

is the price component for regulatory year ‗t-1‘

2. Price control


for the particular regulatory year is:

the Consumer Price Index: All Groups Index for the Eight Capital

Cities as published by the Australian Bureau of Statistics for the

March quarter immediately preceding the start of the relevant

regulatory year

divided by

the Consumer Price Index: All Groups Index for the Eight Capital

Cities as published by the Australian Bureau of Statistics for the

March quarter immediately preceding the March quarter referred

to above

is the prescribed price movement for the price component for

regulatory year t determined in accordance with Schedule 2.

(ii) If the commission has not made a determination in respect of the prices to

apply in the next regulatory period on or before 30 June 2023,

will be set equal to zero for the purpose of adjusting prices in

accordance with the formula in clause 2.3(b)(i) for regulatory years

commencing on or after 1 July 2023 until the date on which this

determination is amended or revoked by a later determination.

(c) Adjustment procedure

(i) At least 30 business days prior to the commencement of each subsequent

regulatory year in the regulatory period, City West Water must submit its

proposed prices for the prescribed services referred to in clause 2.3(a) to

apply in that subsequent regulatory year (the revised scheduled prices) to

the commission for approval, together with sufficient information to enable

the commission to assess whether the proposed prices comply with this

Determination.

(ii) The commission will approve the revised scheduled prices if it considers

that they have been calculated in accordance with the formula set out in

clause 2.3(b)(i).

(iii) The commission will be deemed to have approved the revised scheduled

prices if it has not provided notice under clause 2.3(c)(iv) to City West

Water within 20 business days from the date of its receipt of the revised

scheduled prices.

(iv) If the commission does not approve the revised scheduled prices, the

commission:

2. Price control


(A) will provide notice to City West Water (including a statement of its

reasons);

(B) may request City West Water to provide any additional information

specified by the commission;

(C) will take any additional information provided by City West Water into

account; and

(D) will determine the revised scheduled prices.

2.4. Price changes during a billing period

(a) Application of this clause

This clause 2.4 applies where City West Water issues an invoice in respect of a

billing period during which a change to any price for a prescribed service comes

into effect in accordance with this Determination.

(b) Method of charging

City West Water must not charge the prices determined in accordance with this

Determination in respect of any part of a billing period prior to the effective date of

the change, but may charge for prescribed services in respect of the periods

before and after the effective date of the change at the prices applicable for each of

those periods on a pro-rata basis.

2.5. Reporting requirements

(a) City West Water must make available to the commission all information reasonably

requested by the commission from time to time for the purpose of enabling it to

confirm that City West Water is complying with this Determination.

(b) Without limiting clause 2.5(a), if, during the regulatory period, City West Water

enters into a new contract which relates to the provision of a prescribed service to

which the pricing principles in Schedule 4 relate, City West Water must, within

30 business days of the date of the new contract, on request provide the

commission with a notice specifying:

(i) details of the new contract; and

(ii) information which demonstrates the way in which the prices in the new

contract reflect the relevant pricing principles.

2. Price control


(c) Without limiting clause 2.5(a), if City West Water proposes to stop providing a

prescribed service or refuses to provide a prescribed service to a customer, or

potential customer, during the regulatory period, it must:

(i) in the case of a proposal to stop providing a prescribed service, provide a

notice to the commission stating the nature of the prescribed service which

it proposes to stop providing and the reason why it proposes to stop

providing the prescribed service. This notice must be provided at least

30 business days prior to the date upon which City West Water proposes

to stop providing the prescribed service; and

(ii) in the case of a refusal to provide a prescribed service to a customer, or

potential customer, City West Water must provide a notice to the

commission within 5 business days of the refusal, stating the nature of the

prescribed service and the reason for the refusal.

3. Amendment of Schedule 2



(a) Amendment

(i) City West Water may apply to the commission in accordance with this

clause 3 and Schedule 5 for the amendment of the prescribed price

movements and/or price components included in Schedule 2 for the following

regulatory year (the relevant regulatory year) and all subsequent

regulatory years remaining in the regulatory period (the revised tariff

schedule).

(ii) The average price movement for the relevant regulatory year and for each

subsequent regulatory year in the regulatory period determined in

accordance with the revised tariff schedule must not exceed the weighted

average price movement that would otherwise have applied under this

Determination as calculated in accordance with the following formula.

where City West Water has n tariff categories, which each have up to m

tariff components, and where, for each regulatory year t for which the

calculation is undertaken:

is the tariff charged in regulatory year t-1 for component j of

tariff i

is the proposed tariff for component j of tariff i determined in

accordance with Schedule 2 where the revised tariff

schedule is not applied

is the proposed tariff for component j of tariff i determined in

accordance with Schedule 2 where the revised tariff

schedule is applied

is the quantity of component j of tariff i that was sold in

regulatory year t-2, or, if an actual quantity is not available,

either an estimate of the quantity of component j of tariff i that

would have been sold in regulatory year t-2 or a forecast of

the quantity of component j of tariff i that is expected to be sold

in regulatory year t-2

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(b) Amendment procedure

(i) An application by City West Water under this clause 3 must be received by

the commission at least 80 business days prior to the commencement of

the relevant regulatory year and must be accompanied by the following

information:

(A) (1) a clearly articulated new tariff strategy that is consistent with

clause 11 of the WIRO (the revised tariff strategy); or

(2) an explanation of how the revised tariff schedule is consistent

with the tariff strategy for City West Water approved by the

commission in connection with this Determination, (the relevant

tariff strategy);

(B) a revised tariff schedule that specifies proposed prices for the

relevant regulatory year and prescribed price movements for each

subsequent regulatory year in the regulatory period that is

consistent with the relevant tariff strategy;

(C) a statement setting out evidence demonstrating that City West Water

has provided information to its customers explaining the revised

tariff schedule and how it relates to the relevant tariff strategy and

has consulted effectively with its customers on the revised tariff

strategy (if clause 3(b)(i)(A)(1) applies) and the revised tariff

schedule;

(D) a statement setting out the customer impacts resulting from the

revised tariff schedule and actions proposed by City West Water to

address these customer impacts; and

(E) an explanation of the calculation of the relevant quantities ― ‖.

(ii) The commission may approve the revised tariff schedule submitted by City

West Water under this clause 3 if it is satisfied that:

(A) City West Water has complied with clause 3(b)(i)(A);

(B) the price movements calculated in accordance with the revised tariff

schedule comply with clause 3(a)(ii);

(C) the revised tariff schedule is consistent with the relevant tariff

strategy;

(D) City West Water has consulted effectively with its customers on the

revised tariff strategy (if clause 3(b)(i)(A)(1) applies) and the

revised tariff schedule;

(E) City West Water has effectively addressed customer impacts

resulting from the revised tariff schedule; and

(F) the basis for calculating the relevant quantities ― ‖ is reasonable.



(iii) In determining whether it will approve the revised tariff schedule, the

commission may request City West Water to provide any additional

information specified by the commission and/or to resubmit any of the

matters in clause 3(b)(i)(A)-(E).

(iv) The commission will be deemed to have not approved a revised tariff

schedule if it has not provided notice to City West Water within

40 business days from the date of its receipt of City West Water’s

application under this clause 3.

(v) An approved revised tariff schedule will be taken to amend Schedule 2 to

the extent of any inconsistency.

4. Uncertain or unforeseen events



4.1. General principle

(a) City West Water may apply to the commission for the amendment of this

Determination and/or the adjustment of the scheduled prices in Schedule 2 to reflect

increased or decreased costs incurred by City West Water and/or increased or

decreased revenue received by City West Water as a result of events which were

uncertain or unforeseen at the time this Determination was made (an uncertain

events application).

(b) Whether or not City West Water makes an application under clause 4.1(a), City

West Water must promptly notify the commission upon becoming aware of an event

which could form part or all of the basis of an application.

(c) The commission may take action under clause 4.3(b) in respect of an uncertain

events application where the commission is satisfied that such action is necessary

or desirable to take account of events that were uncertain or unforeseen at the time

of making this Determination provided that the commission is satisfied that such

action takes into account the interests of customers. Generally the matters taken

into account will include positive and negative influences on revenue and

expenditure. The Commission may limit an adjustment to only some events or a

single event.

4.2. Consideration by the commission

(a) Examples of uncertain and unforeseen events

The matters that may, at the discretion of the commission, be taken into account by

the commission under this clause 4 include:

(i) actual licence fees or contributions payable by City West Water during a

particular regulatory year during the regulatory period under section 51 of

the Safe Drinking Water Act 2003 (Vic), section 24 of the Environment

Protection Act 1970 (Vic) and section 4H(2) of the WI Act which differ from

the forecast licence fees or contributions set out in Annexure A for that

regulatory year;

(ii) changes in the timing or scope of expenditure by City West Water on major

capital projects;

(iii) instances where the commission is satisfied that there is a material

difference between the forecast demand levels set out in Annexure A and



actual demand levels for City West Water in one or more regulatory years

during the regulatory period; and

(iv) a change in or to any of the following:

(A) the WI Act, the Water Act 1989 (Vic), the Safe Drinking Water Act

2003 (Vic), the State Owned Enterprises Act 1992 (Vic) and the

Environment Protection Act 1970 (Vic);

(B) any licence issued pursuant to any of the Acts referred to in

clause 4.2(a)(iv)(A);

(C) a relevant tax; or

(D) the Statement of Obligations; or

(E) the introduction or cessation of a statutory carbon price or tax or a

national emissions trading scheme or other scheme relating to the

reduction of greenhouse gas emissions.

(b) Exclusions

In considering an uncertain events application, the commission will not take into

account matters that:

(i) are or should be within City West Water’s control;

(ii) were or should have been known by City West Water at the time the

Determination was made;

(iii) could reasonably have been foreseen by City West Water;

(iv) should be or should have been planned for or managed by City West Water;

and/or

(v) reflect inefficient expenditure by City West Water.

(c) Dispute resolution

Any question as to whether a matter should be taken into account by the

commission under this clause 4 will be determined by the commission in its absolute

discretion.

4.3. Procedure

(a) Application process

(i) An uncertain events application must be accompanied by a statement

setting out:

(A) the details of each relevant uncertain or unforeseen event;

(B) the amount and timing of any increase or decrease in operating

and/or capital expenditure associated with the relevant event during



the regulatory period and/or the amount and timing of any increase

or decrease in revenue associated with the relevant event during the

regulatory period;

(C) the basis for calculating the increase or decrease in operating and/or

capital expenditure and/or revenue referred to in clause 4.3(a)(i)(B);

and

(D) details of the proposed action to be taken by the commission under

clause 4.3(b).

(ii) The commission may identify an event or events which it considers has had

or may have a material impact on City West Water’s operating and/or

capital expenditure and/or revenue and may decide to take action under

clause 4.3(b) in the absence of an uncertain events application by City

West Water.

(iii) The commission may request City West Water to provide any additional

information specified by the commission in connection with an uncertain

events application.

(b) Action by the commission

If the commission is satisfied of the matters set out in clause 4.1(c) in respect of an

uncertain events application or an event identified by the commission under

clause 4.3(a)(ii), the commission may, in its absolute discretion:

(i) amend this Determination or adjust the scheduled prices in Schedule 2

and/or the revenue requirements in Annexure A with effect from a date and

in a manner decided by the commission (in respect of one or more events) at

a time decided by the commission; or

(ii) take the uncertain events application into account in making its

determination in respect of the prices which City West Water may charge for

prescribed services in the next regulatory period.

5. Material error and unintended consequences


5. Material error and unintended consequences

Where the commission is satisfied that in any material respect:

(a) this Determination or any information relied upon in the making of this Determination

contains an error, deficiency or miscalculation;

(b) any information on which this Determination was based was false or misleading in a

material respect; or

(c) such amendment or adjustment is necessary or desirable to avoid an unintended

consequence of this Determination,

the commission may decide to amend this Determination and/or specify a price adjustment,

provided that it is satisfied that such amendment and/or price adjustment takes into account

the interests of customers.

In most cases, an amendment will be undertaken in accordance with the commission‘s

standard consultation process for price determinations, including the issue of a draft

decision and an invitation for interested parties to make submissions to the commission in

relation to the draft decision, as set out in clause 16(a) and (b) of the WIRO.

In some limited circumstances, the commission may amend this Determination without

further consultation, or with only limited consultation. This will be the case where an

amendment is not sufficiently material to warrant a full consultation process, or where there

is urgency that justifies the commission moving quickly, as set out in clause 16(c) of the

WIRO. In these circumstances, the commission will provide its reasons for proceeding with

the amendment without consultation (or with a modified consultation process).

Schedule 1 – Definitions and interpretation



A Definitions

business day means a day on which banks are open for general banking business in

Melbourne, not being a Saturday or a Sunday.

Code means the applicable Customer Service Code made under the WI Act.

ESC Act means the Essential Services Commission Act 2001 (Vic).

GST has the meaning given in section 195-1 of the A New Tax System (Goods and

Services) Tax Act 1999 (Cth).

miscellaneous services means services that are provided in direct connection with

prescribed services, prices in respect of which are either included in Schedule 2 or

determined in accordance with the relevant pricing principles in Schedule 4.

new contract means any contract for prescribed services which is renewed, renegotiated

or entered into during the regulatory period.

next regulatory period means the period commencing on 1 July 2023 and ending on a

date specified by the commission.

prescribed services has the meaning given in the WIRO and includes miscellaneous

services.

price submission has the meaning given in the WIRO.

regulated entity has the meaning given in the WIRO.

regulatory period means the period commencing on 1 July 2018 and ending on 30 June

2023.

regulatory year means each period of twelve months commencing on 1 July and ending

on 30 June.

relevant contract means a contract which relates to the provision of prescribed services.

relevant tax means any tax imposed by or payable directly or indirectly to any government

or public authority in the Commonwealth of Australia (including GST) but excluding:

(a) the licence fees referred to in clause 4.2 of this Determination;

(b) penalties and interest for late payment of any tax; or

(c) any tax that replaces any of the taxes referred to in (a) and (b), where tax includes

any rate, duty, charge or other like or analogous impost.

WI Act means the Water Industry Act 1994 (Vic).

WIRO means the Water Industry Regulatory Order 2014 as at the date of this

Determination.



B Interpretation

Headings are for convenience only and do not affect interpretation. The following rules

apply unless the context requires otherwise.

(a) The singular includes the plural, and the converse also applies.

(b) If a word or phrase is defined, its other grammatical forms have a corresponding

meaning.

(c) A reference to a person includes a corporation, trust, partnership, unincorporated

body or other entity, whether or not it comprises a separate legal entity.

(d) A reference to a clause or schedule is a reference to a clause of or schedule to this

document.

(e) A reference to a determination, agreement or document (including a reference to

this document) is to the agreement or document as amended, supplemented,

novated or replaced, except to the extent prohibited by this document or that other

agreement or document.

(f) A reference to an Act, ordinance, code or other law includes regulations and other

instruments under it and consolidations, amendments, re-enactments or

replacements of any of them.

(g) If a period of time is specified and commences on a given day or on a day of an act

or event, the period of time is to be calculated inclusive of that day.

(h) Any ―notice‖ to be given or matter to be ―notified‖ must be in writing.

(i) The symbol ‗Σ‘ requires a summation to be performed over the range of variables

specified in respect of the algebraic terms specified.

(j) All data which is utilised in calculations made under this Determination will be

utilised to the accuracy, in terms of the number of decimal places, to which it is

given.

(k) A fixed price, charge or fee determined in accordance with this Determination is to

be rounded down and specified to two decimal places.

(l) A volumetric price, charge or fee determined in accordance with this Determination

is to be rounded down and specified to four decimal places.

(m) When a calculation is required under this document:

(i) regulatory year ‗t‘ is the regulatory year in respect of which the calculation is

being made;

(ii) regulatory year ‘t-1‘ is the regulatory year immediately preceding

regulatory year ‗t‘;

(iii) regulatory year ‗t-2‘ is the regulatory year immediately preceding regulatory

year ‗t-1‘.

Schedule 2 – Prices



This schedule should be read in conjunction with Schedule 3, Schedule 4 and Schedule 5. Variable

water, wastewater, and trade waste charges are rounded down to 4 decimal places. All other

charges are rounded down to 2 decimal places.

Tariff and Price Component Price PPM PPM PPM PPM

(1 July 2018) Year 2 Year 3 Year 4 Year 5

1.1 Scheduled fixed potable water prices

Residential water tariff

Water network fee (per annum) 231.18 0.0% 0.0% 0.0% 0.0%

Non-residential water tariff

Water network fee (per annum) 336.74 0.0% 0.0% 0.0% 0.0%

1.2 Scheduled volumetric potable water prices

Residential water tariff

Water usage fee (per kL)

Price step 1 (0-440 litres/day) 2.4904 0.0% 0.0% 0.0% 0.0%

Price step 2 (>440 litres/day) 2.9312 0.0% 0.0% 0.0% 0.0%

Non-residential water tariff

Water usage fee (per kL) 2.5970 0.0% 0.0% 0.0% 0.0%

1.3 All other scheduled prices

Recycled water

Residential – network fee (per annum) 30.53 0.0% 0.0% 0.0% 0.0%

Residential - usage fee (per kL) 2.4904 0.0% 0.0% 0.0% 0.0%

Non-residential - usage fee (per kL) 2.2074 0.0% 0.0% 0.0% 0.0%

Residential sewerage tariff

Sewerage network fee (per annum) 256.54 0.0% 0.0% 0.0% 0.0%

Sewage disposal fee (per kL) 0.8348 0.0% 0.0% 0.0% 0.0%

Non-residential sewerage tariff

Sewerage network fee (per annum) 453.05 0.0% 0.0% 0.0% 0.0%





Sewage disposal fee (per kL) 1.7068 0.0% 0.0% 0.0% 0.0%

Fire services

Private fire service connection fee

(per connection)* 101.90 0.0% 0.0% 0.0%

Non-residential trade waste tariff

Volume (per kL) 0.8152 0.0% 0.0% 0.0% 0.0%

Biochemical Oxygen Demand (per kg) 0.9953 0.0% 0.0% 0.0% 0.0%

Suspended Solids (per kg) 0.5392 0.0% 0.0% 0.0% 0.0%

Total Kjeldahl Nitrogen (per kg) 1.9154 0.0% 0.0% 0.0% 0.0%

Inorganic Total Dissolved Solids (per kg) 0.0194 0.0% 0.0% 0.0% 0.0%

Trade waste – application fees (per application)

Risk Rank 1 2160.21 0.0% 0.0% 0.0% 0.0%

Risk Rank 2 2160.21 0.0% 0.0% 0.0% 0.0%

Risk Rank 3 2160.21 0.0% 0.0% 0.0% 0.0%

Risk Rank 4 594.48 0.0% 0.0% 0.0% 0.0%

Risk Rank 5 General 309.59 0.0% 0.0% 0.0% 0.0%

Risk Rank 5 Commercial Food Business 78.15 0.0% 0.0% 0.0% 0.0%

Trade waste – agreement fees (per annum)

Risk Rank 1 18796.19 0.0% 0.0% 0.0% 0.0%

Risk Rank 2 15590.84 0.0% 0.0% 0.0% 0.0%

Risk Rank 3 7827.36 0.0% 0.0% 0.0% 0.0%

Risk Rank 4 1709.53 0.0% 0.0% 0.0% 0.0%

Risk Rank 5 324.58 0.0% 0.0% 0.0% 0.0%

Trade waste – food waste service

Food waste service (per requistered bed per

annum) 52.55 0.0% 0.0% 0.0% 0.0%

New customer contributions

Water (standard charge, all zones, per lot)

All Lot sizes 704.42 0.0% 0.0% 0.0% 0.0%





Sewerage (standard charge, all zones, per lot)

All Lot sizes 704.42 0.0% 0.0% 0.0% 0.0%

Recycled water (West Werribee and Greek Hill

zone, per lot) 2547.51 0.0% 0.0% 0.0% 0.0%

Core miscellaneous fees and charges (per

application)

Development works application > 10 lots 2356.34 0.0% 0.0% 0.0% 0.0%

Development works acceptance > 10 lots 4492.84 0.0% 0.0% 0.0% 0.0%

Potable water meter installation (20mm) –

new connection 75.62 0.0% 0.0% 0.0% 0.0%

Potable water meter assembly & installation

(20mm) – new connection 273.15 0.0% 0.0% 0.0% 0.0%

Plumbing application 85.13 0.0% 0.0% 0.0% 0.0%

Recycled water connection inspection 236.30 0.0% 0.0% 0.0% 0.0%

Sewer details 65.60 0.0% 0.0% 0.0% 0.0%

Build over easement application 269.37 0.0% 0.0% 0.0% 0.0%

Property service short side installations

(20mm) 1761.11 0.0% 0.0% 0.0% 0.0%

Property service long side installations (20mm) 2141.20 0.0% 0.0% 0.0% 0.0%

Information statement – self-service 17.71 0.0% 0.0% 0.0% 0.0%

Information statement – standard 27.84 0.0% 0.0% 0.0% 0.0%

Information statement – express 51.33 0.0% 0.0% 0.0% 0.0%

Non-core miscellaneous services Actual cost

* New fee introduced in 2019-20, price is in $2018-19.

As set out in clause 1.1(d) of this Determination, the role of the commission in making this

Determination is limited to specifying the maximum prices that City West Water may charge for

prescribed services during the regulatory period, or the manner in which such prices are to be

calculated, determined or otherwise regulated.

It is the role of City West Water to apply a tariff in accordance with the Water Act 1989 (Vic). The

commission does not have a role in hearing disputes about individual billing issues that users may

have.

Schedule 3 – Application of prices



3.1 Water usage fees

(a) It is the role of City West Water to apply a water usage charge in accordance with the

Water Act.

(b) A water usage fee shall be calculated by reference to the volume, expressed in kilolitres, or

part thereof, of water supplied during a meter reading period to a property, properties or

separate occupancies.

(c) For inclining block tariffs, where multiple properties and/or occupancies are being supplied

by a single meter, block allowances will be applied on a pro-rata basis.

3.2 Residential property

For the purpose of Schedule 2, a ‗residential‘ property means

(a) a property used or intended to be used primarily as a residence or residences; and

(b) in the case of vacant land, land zoned for residential purposes.

but does not include a property used or intended to be used as:

(i) a guest house, motel, hotel or caravan park;

(ii) a farming enterprise; and

(iii) a residence attached to a shop or professional suites.

3.3 Non-residential property

For the purpose of Schedule 2, a non-residential property is a property which is not a residential

property.

3.4 Private extension fees

City West Water may, as a term of any agreement with the owner of a property for the supply of

water from its works made under section 124(7) of the Water Act, require that owner to pay:

(a) an annual private extension supply fee equivalent to the Service charge (per annum); and

(b) a private extension usage fee equivalent to the Usage charge (per kL),

specified in item 2.1 of Schedule 2.



3.5 Calculating the volume of sewage — residential customers

Default method

The volume of sewage discharged from a residential property or premises during a meter reading

period shall, by default, be calculated according to the formula:

Volume of Sewage = VW x SF x DF

Where:

VW is the volume of water supplied to the property or premises, being the volume determined for

the purpose of calculating a water usage charge for the same meter reading period or that volume

rounded to the nearest kilolitre;

SF is the seasonal factor, which is derived from dividing:

(a) the total number of days in the meter reading period by the sum of

(b) the number of days which fall within each particular month within the meter reading period

multiplied by the relevant seasonal index shown in Table 2 for that month for a House or a

Unit

Where:

‗House‘ means a building, excluding a Unit, which is used or intended to be used as a

residence.

Unit‘ means a unit within the meaning of the Valuation of Land Act 19601, a group of units

within that meaning, a building used or intended to be used for more than one residence

and a part of a building used or intended to be used as one residence.

1 Under the Valuation of Land Act 1960 a ‗unit‘ is defined as ‗a unit on a registered plan within the meaning of the Strata

Titles Act 1967; a stratum estate within the meaning of the Transfer of Land Act 1958; and a building or part of a building in the exclusive occupation of a person who is entitled to occupation by virtue of being a shareholder in a company which owns the building or a tenant of such a shareholder; and a residential unit in respect of which a residence right in a retirement village under the Retirement Villages Act 1986 is in force‘.



Table 1 Seasonal indices

Month House Unit

January 1.45 1.30

February 1.45 1.30

March 1.30 1.20

April 1.30 1.10

May 1.20 1.00

June 1.00 1.00

July 1.00 1.00

August 1.00 1.00

September 1.10 1.00

October 1.10 1.10

November 1.40 1.10

December 1.40 1.20

DF is the discharge factor shown in Table 3 in respect of the ‗quarterly equivalent volume of water‘.

The quarterly equivalent volume of water is the volume of water calculated by multiplying the

volume of water supplied to or apportioned to the property or premises by 91.25 and dividing the

result by the number of days in the meter reading period, except in the case of water supplied to:

(a) a separately metered property used or intended to be used for more than one residence

where those residences are not separately metered; or

(b) to a property which is not separately metered and to which a volume of water has not been

apportioned,

In which case, the quarterly equivalent volume of water is the volume of water calculated by

dividing the volume of water supplied to all residences or properties sharing the meter by the

number of residences or properties supplied and multiplying the result by 91.25 and dividing that

result by the number of days in the meter reading period.



Table 2 Discharge factors

Quarterly equivalent volume of water Discharge factor

Less than or equal to 125 kl 0.9

More than 125 kl and less than or equal to 250 kl

0.9 less 0.0036 per kl in excess of 125 kl

More than 250 kl 0.45

Notes: For third pipe recycled water customers, volume of water is the sum of metered potable

water and metered recycled water. The formula used for calculating the volume of sewage

discharges is subject to alternative methods.

Alternative methods

Where City West Water is satisfied that the default method is likely to ‗systematically and

substantially overestimate the volume of sewage discharged‘:

(a) a customer can seek a customised discharge factor using the consumption history at the

property to determine the percentage of water disposed to the sewer annually. In the

majority of cases, the formula used to calculate the volume of sewerage differs to that

applied in the default method with the seasonal factor and discharge factor replaced by the

customised discharge factor

(b) extra water meters may be installed (at the customer‘s own cost) to more effectively isolate

the water use which is discharged to the sewerage system; or

(c) City West Water may apply ‗property specific‘ sewage disposal factors to customers that

are served by a third pipe recycled water supply, or any other form of alternative water

supply (eg: rainwater tanks).

The decision on whether to use an alternative method rests with the customer and City West

Water does not guarantee a particular outcome.

3.6 Calculating the volume of sewage — non-residential customers

Default method

The volume of sewage discharged from a non-residential property or premises during a meter

reading period shall, by default, be calculated according to the formula:

Volume of Sewage = VW x DF



Where:

VW is the volume of water supplied to the property or premises, being the volume determined for

the purpose of calculating a water usage charge for the same meter reading period or that volume

rounded to the nearest kilolitre; and

DF is the discharge factor, which is 0.9 or another figure determined by City West Water to result

in a more accurate estimate of the volume of sewage discharged.

For most non-residential customers, the default method coupled with a discharge factor of 0.9 is

used. Exceptions include Category A trade waste customers who typically use water in industrial

processes. In these cases a customised discharge factor will be calculated by City West Water to

account for the volumes of water incorporated into product, lost in steam etc. This will be

undertaken as part of the pricing assessment for trade waste customers.

Customers who do not discharge trade waste use water which does not go to sewer, may request

a customised discharge factor to be calculated by City West Water.

Notes: For third pipe recycled water customers, the volume of water is the sum of metered

potable water and metered recycled water. The formula used for calculating the volume of

sewage discharged is subject to alternative methods (see alternative methods under

clause 3.6).

3.7 Assignment of trade waste risk rank

City West Water assigns all its trade waste customers a risk rank according to a risk rank

algorithm.

The algorithm takes into account specific customer information and discharge characteristics

including:

customer location relative to treatment plant

the volume of trade waste discharged

the nature of the customer‘s business activity

the nature and quality of the customer‘s trade waste

the customer‘s compliance history, where available

City West Water may change a trade waste customer‘s risk rank due to the customer‘s changed

circumstances or updated information.

3.8 Food waste charges

Food waste charges do not apply to residential premises. For hospitals and institutions the charge

applies to food waste that is discharged to sewer via a macerating food waste disposal unit. The

charge is applied against the number of registered beds for which the unit(s) serve.



3.9 Miscellaneous fees and charges

The following table sets out the definitions of the miscellaneous charges contained in Schedule 2.

Miscellaneous service Definition

Development works application > 10 lots

A development works application applies when an extension of City West Water’s reticulated water, recycled water or sewerage mains is required to service a property. Application and acceptance fees cover the costs of City West Water employees to process development works application.

Application fees cover costs associated with processing an application and generating development deed/conditions of offer.

Development works acceptance > 10 lots

A development works application applies when an extension of City West Water’s reticulated water, recycled water or sewerage mains is required to service a property. Application and acceptance fees cover the costs of City West Water employees to process development works application.

Acceptance fees apply when the applicant accepts the development deed/conditions and cover employee costs associated with the subsequent developments works.

Potable water meter installation (20mm) – connection

Under the Water Act 1989, City West Water must permit a property to be connected to the water supply or sewerage systems once an owner or occupier requests connection by notice. However, the owner (or their authorised agent) must agree to meet the cost of making that connection.

Connection costs for water supply differ by connection (meter) size. The meter size can range from 20mm to 250mm. The 20mm connection cost relates to connection of a 20mm water meter.

Potable water meter assembly & installation (20mm) – connection

In the case of a dry tapping installation (tapping installed by developer at time of water main installation), City West Water will provide both the associated pipework and the meter assembly, including property hose tap and dual check valve. The 20mm connection cost relates to connection of a 20mm water meter.

Plumbing application Before undertaking any plumbing works, a property owner (or their authorised agent) must obtain City West Water’s consent to connect. Building plans must be submitted with the application (e.g. new building or extension) if requested by City West Water.

An application fee is required for all plumbing applications made to City West Water. The fee covers employee costs for assessing and processing the plumbing application.




Recycled water connection inspection

City West Water requires that the internal plumbing of all residential recycled water properties is inspected by its nominated contractor. This inspection ensures that, at time of development, there is no cross connection between potable water pipes and recycled water pipes.

Sewer details Developers, consultants and property owners often request a plot showing the location of City West Water’s assets relative to a particular parcel of land. This is known as an ‗asset plot‘ and can be provided for sewer and water. Asset information referred to as ‗sewer details‘ provides size, depth and offset details (where available) for sewerage assets.

Build over easement application

Under the Water Act 1989, a person must seek City West Water’s consent before causing or permitting any of the following:

any structure to be built or any filling to be placed on land over which City West Water has an easement or an easement exists for water supply, sewerage or drainage purposes

any structure to be built or any filling to be placed within one metre laterally of any of City West Water’s works, including structures above or below ground

any soil, rock or other matter that supports, protects or covers any of City West Water’s works to be removed.

A fee is charged for the administrative time spent in assessing whether an approval will be granted, and under what conditions.

Property service short side installations (20mm)

Providing the connection is not inclusive of a private fire service connection (PFSC), City West Water’s nominated meter services contractor is responsible for the installation of the main to meter pipework up to and including five metres from the water main to the property boundary (short side). This also includes all excavation and reinstatement. This is to standardise the installation of all related works for water service connections.

Property service long side installations (20mm)

Providing the connection is not inclusive of a private fire service connection (PFSC), City West Water ‘s nominated meter services contractor is responsible for the installation of the main to meter pipework exceeding five metres and up to 15 metres from the water main to the property boundary (long side). This also includes all excavation and reinstatement. This is to standardise the installation of all related works for water service connections.




Information statement – self-service, standard or express

Under s32 (2)(b) of the Sale of Land Act 1962, vendors of property in CWW‘s service area are required to provide potential purchasers with an information statement from City West Water prior to contract signing. All property-based fees billed by City West Water are included on the information statement. The statement details any encumbrance affecting the land (excluding those shown on land titles), works required to be carried out, matters outstanding and any relevant price or fee.

This information is provided in the form of a rates and encumbrance certificate.

Schedule 4 – Pricing principles



4.1 Recycled water pricing principles

Recycled water prices should be set so as to:

have regard to the price of any substitutes and customers‘ willingness to pay;

cover the full cost of providing the service (with the exception of services related to specified

obligations or maintaining balance of supply and demand); and

include a variable component.

Where City West Water does not propose to fully recover the costs associated with recycled

water, it must demonstrate to the commission that:

it has assessed the costs and benefits of pursuing the recycled water project;

it has clearly identified the basis on which any revenue shortfall is to be recovered; and

if the revenue shortfall is to be recovered from non-recycled water customers, either the project

is required under the Statement of Obligations which applies to City West Water or pursuant to

other government policies that apply to City West Water or there has been consultation with

the affected customers about their willingness to pay for the benefits of increased recycling.

4.2 Pricing principles where scheduled prices do not apply

Where the prices set out in Schedule 2 do not apply because the nature of the service provided to

a particular customer (including, in the case of trade waste customers, the volume or load of waste

treated) is unique, prices must be set as follows:

variable prices (including, in the case of trade waste customers, load-based charges) should

reflect the long run marginal cost of providing services (including, in the case of trade waste

customers, trade waste transfer, treatment and disposal);

the total revenue received from each customer should be greater than the cost that would be

avoided from ceasing to serve that customer, and (subject to meeting avoidable cost) less than

the stand alone cost of providing the service to the customer in the most efficient manner;

the methodology used to allocate common and fixed costs to that customer should be clearly

articulated and be consistent with any guidance provided by the commission;

prices should reflect reasonable assumptions regarding the customer‘s demand for services

(including, in the case of trade waste customers, the volume and strength of trade waste

anticipated to be produced by that customer);

depreciation rates and rates of return used to determine prices should be consistent with those

adopted by the commission for the purposes of making this Determination;



customers should be provided with full details of the manner in which prices have been

calculated and any new, renewed or renegotiated contractual agreements with customers

should indicate that the prices to apply are subject to any Determination made by the

commission;

where applying these principles results in significant changes to prices or tariff structures,

arrangements for phasing in the changes may be considered and any transitional

arrangements should be clearly articulated.

4.3 Pricing principles for New Customer Contributions (NCC)

Core pricing principles

NCC, including standard or negotiated NCC, will be calculated by applying the following core NCC

pricing principles.

Standard and negotiated NCC will:

have regard to the incremental infrastructure and associated costs in one or more of the

statutory cost categories attributable to a given connection;

have regard to the incremental future revenues that will be earned from customers at that

connection;

be greater than the avoidable cost of that connection and less than the standalone cost of that

connection.

Notes:

1. Given that NCC are to be based on the net incremental cost of connection (ie incremental

costs net of incremental benefits), in this context, the costs referred to in the efficient pricing

bound are the net costs, specifically the avoidable net cost of connection and standalone net

cost of connection.

2. Where the connection arrangement requires assets to be gifted, the value of gifted assets

will be excluded for the purpose of calculating net costs.

3. Incremental costs may include financing costs associated with constructing an asset sooner

than planned.

NCC application

NCC are applied on a per lot basis, and may be levied on any connection of a new customer that is

separately titled or is, or can be, individually metered.



Incremental financing costs

Incremental financing costs (IFC) should be calculated using this formula:

( *

+) cost of capital being provided sooner than planned

where:

r estimated pre-tax regulatory rate of return

n the number of years the asset is required sooner than planned.

Gifted Assets

City West Water can require developers to provide and gift to City West Water specified assets

as a condition of connection, provided that City West Water:

makes clear to potential developers which assets a developer will be responsible for providing

and gifting, and which will be provided by City West Water;

confirms that negotiation of any non-standard connection and associated charges will be

undertaken in accordance with City West Water’s published negotiating framework; and

the value of gifted assets will be excluded for the purposes of calculating net costs.

4.4 Pricing principles for miscellaneous services not included in

Schedule 2

Prices for miscellaneous services must be set according to actual cost calculated on the basis of

the aggregate of:

direct third party or contractor invoice cost;

direct marginal internal costs, including labour, materials and transport costs; and

a fair contribution to overheads.

For bank dishonour, debt collection and legal fees, the third party costs must be charged directly to

the customer with no contribution for internal costs or a contribution to overheads.

4.5 Guidelines

City West Water must comply with any guidelines issued by the commission from time to time

which relate to the setting of prices for prescribed services to which Schedule 4 relates.

Schedule 5 – Adjustment for costs associated with annual updates to the trailing average

cost of debt


Schedule 5 – Adjustment for costs associated with

annual updates to the trailing average cost of debt

If in any regulatory year Condition A and/or Condition B and/or Condition C and/or Condition D

apply, the formula set out in clause 2.3(b) is not applicable to the extent it relates to the prices

outlined in Schedule 5A. These prices are set out in items 1.1 to 1.3 of Schedule 2.

Instead the prices above will be adjusted in accordance with the formulas (as applicable) provided

below, with effect from the beginning of each subsequent regulatory year in the regulatory

period.

City West Water must comply with any guidance issued by the Commission from time to time

which relate to the setting of prices for prescribed services to which Schedule 2 and 4 relates.

Schedule 5A – Adjustments to prices

Condition A (Annual cost

of debt update)

Condition B (Melbourne Water

bulk water headworks cost

change)

Condition C (Melbourne Water

bulk sewerage cost change)

Condition D (Melbourne Water desalination water

order)

1.1 Scheduled fixed potable water prices

X X

1.2 Scheduled volumetric potable water prices

X

1.3 Residential sewer service charge

X X

1.3 Non-residential sewer service charge

X


cost of debt


Schedule 5B – Prices

Condition A – Annual cost of debt update

Condition A will apply when the trailing average cost of debt in any regulatory year ‗t‘ changes

in that year. The adjustment is calculated as per formula 4.

The difference in the forecast and actual regulatory rate of return in any regulatory year ‗t‘ is

multiplied by the average of the regulatory asset base (RAB) to determine the change in City

West Water’s total expected return. The RAB is set out in Table 5 of Annexure A.

The trailing average cost of debt adjustment will be apportioned across the tariffs listed in

Schedule 5A.

Formula 1: Determining the nominal cost of debt

∑

Is equal to the simple average of the 10 years up to (but not inclusive of)

regulatory year ‗t‘ of:

- The data series outlined in Table 1 of Annexure A

and

- RBA Table F3 – Non-financial corporate BBB-rated bonds – Yield – 10 year target tenor [Series ID FNFYBBB10M]

from 1 April to 31 March before the start of regulatory year ‗t‘ (e.g. 1 April 2017 to 31 March 2018 in relation to 2018-19)

Formula 2: Determining the real cost of debt

Is the inflation factor which is equal to 2.3% for all regulatory years

Formula 2 outlines the process for converting the trailing average cost of debt from nominal to real

using the Fisher equation.


cost of debt


Formula 3: Determining the real regulatory rate of return

Is the post-tax ‗vanilla‘ regulatory rate of return in real terms for regulatory

year ‗t‘ rounded to two decimal places, i.e. 4.347% is rounded to 4.35%

Is the real cost of equity determined through City West Water ‘s PREMO

rating, which is equal to 4.9% for 2018-19 to 2022-23

Formula 4: Trailing average cost of debt adjustment

(

)

∑

Is the trailing average cost of debt adjustment applied proportionally to

tariff j, based on tariff j‘s relative share of total revenues. Total revenues refer to the sum of all revenue received across the tariffs listed in Schedule 5A to which the cost of debt adjustment will apply.

Is the actual calculated real post tax ‗vanilla‘ regulatory rate of return in

regulatory year ‗t‘

Is the determination real post tax ‗vanilla‘ regulatory rate of return in

regulatory year ‗t‘

Is the determination opening regulatory asset base in regulatory year ‗t‘

Is the determination closing regulatory asset base in regulatory year ‗t‘

Is the Consumer Price Index: All Groups Index for the Eight Capital Cities as published by the Australian Bureau of Statistics (6401.0 - Table 8) for the March Quarter immediately preceding the start of the relevant regulatory year

Is the Consumer Price Index: All Groups Index for the Eight Capital Cities as published by the Australian Bureau of Statistics (6401.0 - Table 8) for the March Quarter in year 2017 equal to 110.5

Is the price for tariff j at regulatory year ‗t‘ before the cost of debt

adjustment where:

( )


cost of debt


Is the price for tariff j in regulatory year ‗t-1‘

Is the determination quantity for tariff j in regulatory year ‗t‘

∑

Is the sum of all revenue received across the tariffs listed in Schedule 5A to which the cost of debt adjustment will apply

Formula 4 outlines the process for calculating the adjustment to prices outlined in Schedule 5A to

reflect the new cost of debt. This is done in two steps. The first step is to calculate the change in

the revenue requirement by multiplying the adjustment to the rate of return, to reflect the updated

cost of debt, by the average regulatory asset base.

The second step is to apply the change in the revenue requirement proportionally to tariff j, based

on tariff j‘s relative share of total revenues. Total revenues are defined as the sum of all revenues

received across the tariffs listed in Schedule 5A to which the cost of debt adjustment will apply.

Condition B – Bulk water headworks costs adjustment

Condition B will apply when Melbourne Water’s bulk water headworks costs in any

regulatory year ‗t‘ differ from forecast in that year. The changes in costs will be calculated in

accordance with formula 6 and apply to the tariffs listed in Schedule 5A.

Condition C – Bulk sewerage costs adjustment

Condition C will apply when Melbourne Water’s bulk sewerage costs in any regulatory year

‗t‘ differ from forecast in that year. The changes in costs will be calculated in accordance with

formula 8 and apply to the tariffs listed in Schedule 5A.

Condition D – Water order – Desalination plant

Condition D will apply when the water order volume in any regulatory year differs from a

water order of 0 GL and where the costs are passed on to customers. The changes in costs

incurred for desalinated water orders will be calculated in accordance with formula 10 and

apply to the tariffs listed in Schedule 5A.


cost of debt


Formula 5: Water service tariff

(

)

The water service charge for tariff j in regulatory year ‗t‘ as a result of

changes in City West Water’s trailing average cost of debt and Melbourne Water’s bulk water headworks costs.

Is the water service charge for tariff j in regulatory year ‗t-1‘

Is the Consumer Price Index: All Groups Index for the Eight Capital Cities as published by the Australian Bureau of Statistics (6401.0 - Table 8) for the March Quarter immediately preceding the start of the relevant regulatory year.

The prescribed price movement for the price component for tariff j in

regulatory year ‗t‘ as per the determination

Is the bulk water cost adjustment applied to City West Water’s water

service tariff j in regulatory year ‗t‘ to account for changes in Melbourne Water’s trailing average cost of debt and desalination contract cost changes as outlined in formula 6.

Formula 6: Bulk water cost adjustment

∑

is the adjustment to the water service charge for tariff j (

) from

changes to Melbourne Water’s bulk headworks costs ) as a

proportion of the total water service revenue ∑

.

Is the total amount of expenditure to be passed through (either

positive or negative) in regulatory year ‗t‘ on the water fixed service charges to account for changes in Melbourne Water’s bulk headworks costs.

The water fixed service charge for tariff j in regulatory year ‗t‘ before the bulk headworks cost and cost of debt adjustments where:

(

)



cost of debt


∑

Is the sum of all revenue received across water fixed service charges in regulatory year ‗t‘

Formula 7: Sewerage service tariff

(

)

The sewerage service charge for tariff j in regulatory year ‗t‘ as a result of changes in City West Water’s trailing average cost of debt and Melbourne Water’s bulk sewerage fixed costs.

Is the sewerage service charge for tariff j in regulatory year ‗t-1‘

Is the Consumer Price Index: All Groups Index for the Eight Capital Cities as published by the Australian Bureau of Statistics (6401.0 - Table 8) for the March Quarter immediately preceding the start of the relevant regulatory year


regulatory year ‗t‘ as per the determination.

Is the bulk sewerage cost adjustment applied to City West Water’s

sewerage service tariff j in regulatory year ‗t‘ to account for changes in Melbourne Water’s trailing average cost of debt as outlined in formula 8.

Is the trailing average cost of debt adjustment applied proportionally to

tariff j, based on tariff j‘s relative share of total revenues. Total revenues refer to the sum of all revenue received across the tariffs listed in Schedule 5A to which the cost of debt adjustment will apply.

Formula 8: Bulk sewerage cost adjustment

∑

Is the adjustment to the sewerage service charge for tariff j (

) from

changes to Melbourne Water’s bulk sewerage costs ) as a

proportion of the total sewerage service revenue ∑

.

Is the total amount of expenditure to be passed through (either positive

or negative) in regulatory year ‗t‘ on the sewerage fixed service charges to account for changes in Melbourne Water’s bulk sewerage costs.


cost of debt


The sewerage fixed service charge for tariff j in regulatory year ‗t‘ before the bulk sewerage cost and cost of debt adjustments where:

(

)


∑

Is the sum of all revenue received across sewerage fixed service charges in regulatory year ‗t‘

Formula 9: Water variable tariff

( )

The water variable charge for tariff j in regulatory year ‗t‘ as a result of costs associated with a desalination plant water order.

Is the water variable charge for tariff j in regulatory year ‗t-1‘



regulatory year ‗t‘ as per the determination.

Is the desalinated water order cost adjustment applied to the water

variable charge for tariff j in regulatory year ‗t‘ as outlined in formula 10.

Formula 10: Desalination water order cost adjustment

∑

Is the desalinated water order cost adjustment applied to the water

variable charge for tariff j in regulatory year ‗t‘


Is the Consumer Price Index: All Groups Index for the Eight Capital Cities as published by the Australian Bureau of Statistics (6401.0 - Table


cost of debt


8) for the March Quarter in year 2017 equal to 110.5.

Is the determination quantity for each water variable tariff j in regulatory year ‗t‘

Is the actual bulk desalinated water order costs incurred by City West

Water in regulatory year ‗t‘

Is the determination bulk desalination water order costs for regulatory

year ‗t‘

Annexure A


Annexure A

Table 1 Historical cost of debt (nominal)

Per cent

2008-09 2009-10 2010-11 2011-12 2012-13 2013-14 2014-15 2015-16 2016-17 2017-18

Cost of debt 6.92% 7.36% 7.05% 6.31% 5.27% 7.05% 5.36% 5.27% 4.91% 4.53%

Table 2 Forecast real regulatory rate of return

Per cent

2018-19 2019-20 2020-21 2021-22 2022-23

Regulatory rate of return 4.13% 4.13% 4.13% 4.13% 4.13%

Table 3 Benchmark revenue requirement

$m 2017-18

2018-19 2019-20 2020-21 2021-22 2022-23

Operating expenditure 478.6 474.6 466.5 467.1 467.7

Return on assets 77.8 78.7 79.1 78.9 78.6

Regulatory depreciation 76.8 75.6 76.2 78.6 65.1

Adjustments from last period 0.0 0.0 0.0 0.0 0.0

Non-prescribed revenue offset of revenue requirement

0.0 0.0 0.0 0.0 0.0

Tax allowance 16.3 15.3 14.6 14.2 10.8

Total 649.5 644.2 636.4 638.8 622.3

Annexure A


Table 4 Updated regulatory asset base

$m 2017-18

2012-13 2013-14 2014-15 2015-16 2016-17

Opening RAB at 1 July 1,648.6 1,796.2 1,865.2 1,868.8 1,846.1

Plus Gross capital expenditure 201.5 130.1 80.9 79.3 92.5

Less Government contributions 0.6 1.2 5.0 2.5 1.3

Less Customer contributions 17.6 17.0 21.5 27.9 33.1

Less Proceeds from disposals 0.4 0.8 0.8 16.6 0.9

Less Regulatory depreciation 35.4 42.0 50.1 55.0 57.2

Closing RAB at 30 June 1,796.2 1,865.2 1,868.8 1,846.1 1,846.1

Table 5 Rolled forward regulatory asset base

$m 2017-18

2017-18 2018-19 2019-20 2020-21 2021-22 2022-23

Opening RAB at 1 July 1,846.1 1,874.3 1,893.6 1,915.8 1,916.3 1,903.5

Plus Gross capital expenditure 109.5 120.9 122.8 101.4 90.6 90.1

Less Government contributions 0.0 0.0 0.0 0.0 0.0 0.0

Less Customer contributions 21.2 24.3 24.5 24.2 24.2 23.8

Less Proceeds from disposals 0.5 0.5 0.5 0.5 0.5 0.5

Less Regulatory depreciation 59.6 76.8 75.6 76.2 78.6 65.1

Closing RAB at 30 June 1,874.3 1,893.6 1,915.8 1,916.3 1,903.5 1,904.2

Annexure A


Table 6 Approved licence fee and environmental contribution assumptions

$m 2017-18

2018-19 2019-20 2020-21 2021-22 2022-23

Essential Services Commission licence fee

0.39 0.39 0.39 0.39 0.58

Department of Health and Human Services licence fee

0.14 0.14 0.14 0.14 0.14

Environment Protection Authority licence fee

0.12 0.12 0.12 0.12 0.12

Environmental contribution 25.96 25.38 24.81 24.25 23.71

Table 7 Bulk water and sewerage costs

$m 2017-18

2018-19 2019-20 2020-21 2021-22 2022-23

Bulk water and sewerage

costs 346.9 342.7 334.7 335.3 335.9

Annexure A


Table 8 Demand forecast

2018-19 2019-20 2020-21 2021-22 2022-23

Water assessments (no.)

Residential 443,207 454,807 465,907 476,807 487,557

Non-residential 36,125 36,719 37,288 37,847 38,398

Total 479,331 491,526 503,195 514,654 525,955

Sewerage assessments (no.)

Residential 442,062 453,662 464,762 475,662 486,412

Non-residential 34,849 35,443 36,012 36,571 37,122

Total 476,911 489,105 500,774 512,233 523,534

Billable water consumption (ML)

Residential 63,401 64,481 65,514 66,460 67,093

Non-residential 42,296 42,377 42,460 42,468 42,146

Total 105,697 106,859 107,975 108,928 109,239

Annexure A


Table 9 Major capital projects

Projects Expected start

date

Expected

completion date

CBD sewerage strategy stage 1 (Spencer Street) In progress 2018-19

Nicholson Street (Carlton/Carlton North) water main renewal

In progress 2019-20

Greek Hill water supply (Dohertys Rd, Derrimut Rd & Davis Rd mains and Melbourne-Geelong pipeline interconnection)

2018-19 2019-20

West Werribee sewage pump station upgrade In progress 2019-20

Greek Hill recycled water supply (Dohertys Rd, Derrimut Rd & Davis Rd mains)

2018-19 2019-20

CBD sewerage strategy stage 2 (Lonsdale Street) 2018-19 2020-21

Mt Atkinson outlet sewer 2019-20 2020-21

Billing and collection system replacement 2020-21 2022-23

Ravenhall outlet sewer 2020-21 2022-23

Tarneit West outlet sewer (section 1) 2020-21 2022-23

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